Role of Development Banks in Promoting Industrial Energy Efficiency: India Case Studies

The Industrial Development Bank of India (IDBI) is the premier institution in India purveying financial assistance to the industrial-sector projects. Its annual lending amounts to $6 billion. Recognizing the need to increase lending for energy efficiency and environmental management (ee/em) projects, the Asian Development Bank (ADB) provided a $150 million line of credit to IDBI. These funds were lent to cement, steel, paper, sugar and other industries. Accompanying the line of credit, ADB also provided funds for technical assistance to strengthen IDBI’s capability for the assessment of projects related to energy efficiency and environmental management (ee/em). The technical assistance (TA) focused on IDBI’s institutional capability, the procedures it follows for lending in this area, studies of ten energy-intensive sectors, and training and data needs to improve its lending. The findings of the TA reveal a need to (1) use ee/em indicators during IDBI’s appraisal, approval, and monitoring of projects, (2) increase the ee/em information resource base – in-house and out-house ee/em experts, handbooks, computerized data bases – that IDBI staff can access, and (3) increase awareness of ee/em components among industrial borrowers. The sector studies show that there is at least a 20% lag compared to best practice for energy use, and that a significant potential, $1.0 billion, exists for investment in ee/em activities. These activities include (a) housekeeping measures such as improved lighting, variable-speed motors/drives, improving power factor, etc., (b) installing co-generation and captive power generation units, and (c) changing manufacturing processes to more efficient and less polluting ones. Training and data needs were also identified which would improve IDBI’s lending for energy efficiency and environmental management.